Americas: Citigroup pays $5 billion for sears' credit card unit, The

Global Finance, Oct 2003

Citigroup agreed to acquire the credit card and financial products business of Illinois-based Sears, Roebuck for an estimated $5 billion.

The purchase will make Citigroup the largest private-label card provider in the US and extend its lead as the nation's largest credit-card company.

The acquisition price was to consist of an estimated $3 billion in cash and up to $2 billion in profit-related payments, according to Thomson Financial Securities Data.

Sears is leaving the consumer-finance business after 90 years to concentrate on its core retail business. Sears and Citigroup will enter into a long-term marketing and servicing alliance with an initial term of 10 years. Some 8,300 full- and part-time Sears employees will move over to Citigroup when the deal closes, which is expected at the end of this year.

New York-based Standard & Poor's cut its debt rating on Sears, saying that the credit business has been a vital factor in assessing the company's overall credit rating.

"The downgrade reflects the absence of this historically important foundation to the credit rating and a greater reliance on a retailing business that has a very challenging future," the rating agency said.

Sears plans to use the proceeds of the sale to pay down debt and for general corporate purposes.

Robert B. Willumstad, president of Citigroup and chairman and CEO of its global consumer group, says the transaction creates growth opportunities for the bank. "Sears is a unique franchise, as 60% of US households are Sears customers, including a significant Hispanic customer base-a key focus of our consumer business marketing efforts," he said in a statement.

Copyright Global Finance Media Inc. Oct 2003
Provided by ProQuest Information and Learning Company. All rights Reserved

 

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